The Federal Reserve made the biggest interest rate hike since 2000 in response to the Russian war in Ukraine
On May 5, 2022, the Federal Reserve raised its benchmark interest rate by 0.5 percentage points to a target rate range between 0.75% and 1%. The hike is the largest since 2000 and follows a 0.25 percentage point increase in March 2022, the first increase since December 2018.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity,” the Fed explained.
In the U.S., inflation is now running at a 40-year high. In March 2022, the Consumer Price Index (CPI) was 8.5% higher than a year ago, driven up by rising prices for gasoline, shelter, and food, partly due to the impact of Russia’s war in Ukraine on global food and energy prices. The increasing costs of essential goods and services now outstrip average wage gains.